By Philip Pilkington, a journalist and writer based in Dublin, Ireland
We hear it time and time again: EU taxpayers are paying for the bailouts in the European periphery. The problem with this statement? As popular as it may be in the media right now, it’s not quite true – at least, it’s not true if you take a proper macroeconomic perspective on the crisis rather than looking at it through the crass lens of nationalism.
This isn’t an argument being put forward by third-rate hack writers either; no, it wasn’t cooked up in a stinking pot of garbled prose stew by a Thomas Friedman. It is instead a fallacy peddled by some of the most respectable writers in business.
First of all, no taxpayers have actually been ‘charged’ for the bailout of the Eurozone periphery. This may seem like an obvious point but the more people I talk to about this the more I feel that it needs to be described as clearly as possible: The German citizenry have not incurred a ‘PIIGS tax’ to fund the bailout.
To be fair, better commentators don’t usually make this assertion, but their arguments do often follow an ‘as if’ logic. They state that the bailouts are putting taxpayers’ money at risk and then they carry on as if poor Hans and Gretel have already had to fork over their left leg to fund the profligate PIIGS.
Take the following article by Otmar Issing that was run in the Financial Times recently. Issing moves from correctly stating that taxpayers’ money is being put ‘at risk’, to a vague moralising about how the stoical core will have to float the profligate periphery. Queue: talk about ‘fiscal discipline’, ‘free riding’ and ‘transfers of taxpayers’ money’.
Don’t be fooled by Issing’s crass use of phrases such as ‘no taxation without representation’, he’s not so much worried about the difficulties inherent in creating a truly federal Europe. His real message is quite clear – although from his sometimes purple patches of rhetoric you might have missed it:
A monetary union with a stable euro can only survive if central bank independence is fully respected. This implies that the European Central Bank abstains from fiscal policy actions.
Why? Because…
…it [i.e. allowing pan-European fiscal policy] is a move on a slippery road to a regime of fiscal indiscipline drowning hitherto solid countries in the morass of over-indebtedness.
Question: is Issing an anti-EU nationalist? I would be fine if he is – I think anti-EU nationalists have a respectable opinion that deserves to be heard – and in such a case his rhetoric might make sense. But he gives off airs that he is, in fact, a committed Eurocrat (and he has the credentials to boot). This makes no sense. His argument is fundamentally anti-Union – at least, from the perspective of the current union as it actually exists. What he’s doing is sneaking nationalism through the back door via the seeming rationality of, as he puts it, ‘central bank independence’ which he – rather curiously – equates with the ECB abstaining from fiscal policy.
Okay, maybe I’m being unfair; maybe Issing doesn’t actually understand the EU project itself. Maybe he has forgotten the goals set down by European leaders after WWII amidst the current economic turmoil. Or maybe he was never wholly clear on what Europe was imagined to be by these men and women because he always thought in the moral terms of the Stability and Growth Pact – that is, deficit reduction to please some dark but self-imposed god – rather than taking a more detached macroeconomic view.
In order to explore Issing’s fallacies – shared by so many others – we must return to our original point: European taxpayers have not been charged for the bailouts. Instead what has occurred is that various Eurozone governments have had to issue more government debt in order to float the periphery for, broadly speaking, its consumption of goods. However, to stress the point: taxation has not by necessity been increased to float this new debt.
Fine, if we accept this and take a very narrow view we can say that the core countries have issued more government debt so that the periphery could enjoy a higher standard of living. But that oversimplifies the situation.
Core countries such as Germany relied on the periphery as a consumption base during the boom years – and they still do. If the periphery were not consuming German products the growth rate of the German economy would have been significantly impaired. The only way that they would be able to keep up their current (or, if we want to moralise on a hypothetical past, their previous) economic growth would be… wait for it… to run larger fiscal deficits to increase domestic consumption. This would, of course, also lead to an expansion of government debt.
“But,” Issing will say, “Under those circumstances the German people would be the ones benefiting from the newly produced goods.” Fair enough – only one problem: the Germans are, and always have been, terrified of inflation. There’s simply no way any respectable German politician or central banker would allow such domestic consumption by way of government deficits. Spectres of Weimar-era hyperinflation still haunt the German halls of power.
And so we’re brought full circle. We have just highlighted one of the key reasons that the economic union was set up. In a successful economic union all the members could allay themselves of their economic anxieties – whether they be the very real anxieties of peripheral poverty or the semi-imaginary core anxieties about runaway inflation – and work together for the greater good.
The government debt that Germany and other core countries are issuing is simply bolstering peripheral debt that was, in all essentials, used to buy goods from Germany and the other core countries. It’s like fiscal expenditure at one step removed – without the feared inflationary implications for the ever-anxious core.
To say that this is somehow morally wrong as Issing does is the equivalent of a New Yorker complaining about the profligacy of an Alabama resident. It’s one economy, stupid – and you take the good with the bad.
Of course, a key issue here is whether this fiscal spending might actually cost the German taxpayer at the end of the day. We need to be clear on this: if the German government – or any Eurozone country – decides to raise taxes, for whatever reason, this is a purely political decision which they need to be held accountable for by their own people, it does not, nor should it, have any direct tie to the new debt that has been issue to fund the EU bailouts.
Of course, it seems unlikely that the any of the core countries will raise taxes on their citizens as a direct response to the periphery bailouts. However, there is a possibility that the current crisis might eventually make investors anxious about the government debt of the core. We should not view this in the narrow terms of “X bailed out Y therefore Y is to blame for X’s rising bond yields’. To do so is, once again, to moralise rather than look at the overall situation as it actually is. If bond yields in the core countries do rise this will be as a result of the mishandling of the Eurozone crisis – NOT because of a bailout of the periphery per se.
Right now it looks like such anxiety may have arisen among investors not because of Germany’s government debt but rather due to uncertainty and conflict over the handling of the crisis. It is the hesitation that is resulting from arguments like Issing’s that is leading to panic. Add to that the very real threat of major slowdown and perhaps even recession in the Eurozone as a whole – brought on, of course, by the austerity project currently underway – and you’ve got a recipe for disaster and potential investor anxiety. But it is not German debt levels that will drive such chaos – far from it.
We need to drop this crass moralising about profligates and stoics. It’s nonsense. It’s nothing but a stupid, crass way of looking at the situation in Europe that serves no purpose except maybe to increase the animosity between football fans. In short, we need to see the woods from the trees and stop bouncing between implicitly pro-EU and implicitly anti-EU stances. Until we can do this we may as well chalk the EU project up as an abject failure.
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People are not taxed it is just that their govts are issuing more bonds.What kind of logic is that? the more debt you have the more interest payments and obligations of the country.
I guess taxes will come next, like the liberals are talking ” balanced approach to deficit reduction”.
“Crass” is a word like “graft”; American media avoids its use.
Moralizing is what American economic thinking is all about – ; “Why we deserve to be richer than others”.
The best way to reduce government debt — and generate revenue for interest payments — is to grow your economy. What I’m arguing is that the Eurozone needs to be viewed as a single entity due to the mutual reliance on trade etc.
Germany need the periphery to export. Without them buying products the German economy would grow much more slowly. My guess is that such slow growth would be far more punishing than paying the interest on a few more bonds.
Philip,
Government printing devalues the currency in my pocket, in my savings accounts, in my investments (in companies with clean balance sheets) relative to worthless investments made by other human beings.
Printing is taxation.
(And, while it’s not the point of your article, I favor printing and taxation for the benefit of laborers — not what governments are doing with the money…i.e., bombing the ME, paying Wall Street salaries.)
It’s not that simple. If there are unemployed resources (including people) new currency can be used to employ them. This will create additional goods and services and so inflation (which is what you’re describing) will not take place.
As for currency devaluation vis-a-vis other currencies its even more complex again and I’m not getting into it here.
You’re right though, that doesn’t have anything to do with the article.
Why don’t we just print money and give it to the people, the real owners of the country, directly, intead of through government spending?
Just keep beating them over with free moeny until they repent and start spending. Teach the world a lesson.
And in doing so you inflate the price of unemployed resources (like labor), which are unemployed for precisely the reason that their price is too high. You gain nothing. Every good produced in this way is offset by higher costs. All you have accomplished is a redistribution from taxpayer and consumer to the owner of the resource (ie laborers), and a reallocation of economic production from more useful goods to less useful.
Costard, your view of utility is colored by notions of fair value emanating from a pre-existing system for which many don’t agree that the ground rules are fair, adequate or reasonable. In fact, many think the ground rules were established precisely to devalue the average person’s view of labor’s contribution to wealth.
And this just in…utility’s relative, not absolute.
Costard you are so right. Finally someone has said the truth that has been obscured. We need to start accepting the wages of people in the developing world. Man I can’t wait to work in a sweatshop making ipods and watching my coworkers jump off their dorms! Thanks for setting me straight!
But what about the intervening period? Neither development of new production facilities, nor the finding and starting to extract resources are things that happen in dt=0. Sure, in an ideal economy with lots of spare capacity this might apply, but even then there can be other considerations keeping producers from choosing to increase output.
(In addition, things like commodity speculation can just as easily drive up the price of goods, and that way cause inflation.)
> It’s not that simple. If there are unemployed resources
> (including people) new currency can be used to employ them.
> This will create additional goods and services and so inflation
> (which is what you’re describing) will not take place.
More goods driven into existence by a central planner,
where there is obviously no demand (remember, they
were unemployed). Brilliant idea, central planner. You
presumed it was a liquidity constraint, so you broke the
liquidity logjam, only it wasn’t a liquidity constraint.
If all you have is a hammer, every problem looks like a nail.
> As for currency devaluation vis-a-vis other currencies
> its even more complex again and I’m not getting into it here.
>
> You’re right though, that doesn’t have anything to do
> with the article.
Yes, like all good central planners, let’s ignore the complexity of the non-linear dynamic system we’re fucking with, and pretend it’s linear with absolutely no feedback loops or other complications…because it makes my central planning job simpler.
You guys suck, and are a large part of the reason why we’re all in this mess…..give up the keys to the car, loser.
Costard,
I’m not unemployed because my price is too high, I’m unemployed because there are no f*ck*ng jobs here in my line of work.
More debt = stronger economy, and stronger economy = less debt? The mythological fountain of liquidity? Ok — but where did the money come from, what is the effect of its being redirected (or created), and how will this redirection (or creation) affect the ability of eurozone neighbors to buy German exports?
Furthermore, I cannot imagine a more perverse nationalism than one incapable of distinguishing between German exporters and German taxpayers. You might as well say that, since we sit at the same table, I shouldn’t mind paying for your dinner. The imbalance is not between Germany and Greece – it is naive to think so – but between the German public and German industry, and in an opposite fashion between Greek industry and the Greek public. But because these imbalances manifest through trade and forced debt forgiveness, and show themselves at different times, you have the blueprint for a system that pits two peoples against each other, over a system that benefitted neither. And this is what you are defending.
Issuing debt and just who ultimately pays for it? The public. The taxpayer. Whether the money comes from VAT, now… or a new tax later.
And just who in their right mind compares the unity of Europe to the unity of The US? That is right. Only intellectual midgets do so.
Lend us 5 billion.
Thanks a million mate!
Sorry mate. No more QE coming out of the USA to stimulate the global economy in order to bring new jobs to America ? Ha at least not today.
Why not direct Government employment of the unemployed, to do that work which would be good to be done, but which otherwise would not be profitable enough for anybody to undertake?
A
Am I not allowed to post on this thread or something?
The peoples of the periphery are being taxed indirectly through raises in VAT, delaying retirement age + expanding the years of working time to lower retirement incomes, cutting governments social expending, slashing working people rights, cutting social workers incomes, frizzing pensioners incomes, and so on.
Maybe not yet in the core of Europe, but the periphery is already paying and will pay for long time.
And as Germany kills the periphery clients through austerity, their boom will stop and soon.
Let’s see what’s next, because the world won’t grow with 20% unemployment and 50% in mining wage.
Anyway, I agree with rest of the article -:)
Correction: minimum wage.
Besides the Issing-bashing, which is partly well argumented, one question: what are the income sources of a sovereign??? Looking at the bailoutfunds as a investment of the sovereign for which it has to borrow money, means, that in case of a default the people will have to pay.
IMHO its finally all about the debt. Raising debt has to be a shortterm-tool, because the positive effect won´t last and will have a negative effect on the long run.
And the one thing I don´t understand why sovereigns don´t check that (despite inflation blabla) a household can´t keep running if the debt is around 100% (60%, 120%) of the annual income and my annual expenses are higher than income…
When we bought our house, many years back, our total household debt soared to over 200% of annual income, and debt servicing ate over 30% of annual income.
Nobody considered us ‘broke’, instead we were congratulated for being the proud ‘owners’ of our home. (well, we had to pay our mortgage during many years before we were really owners of the place).
So the total amount of debt has no significance whatsoever. Only ‘ability to pay’ and ‘willingness to pay’ count. And with money being made available at 0% (or close to that), ‘ability to pay’ is not a problem either.
my main point is that the expenses are higher than the income, so with a net loss every period no one can survive on the long run
Undoubtedly true, except you weren’t planning on running a deficit for for the forseeable future and adding to your debt load every year and your debt service coverage was 30%. The absolute amount of debt does matter, as does the relationship to income I (and spending), the reliability of future income and the value of the asset being funded. You did what a lot of people did and you got lucky. You had income, probably didn’t add to your debt every year, and your asset held its value or increased. Any of those things not working and your 200% debt would have been big problem. Look around you and you’ll see that none of those things are valid now. Therefore, big problem and collectively, people are broke.
Oi Next Gen,
How you gonna pay him back??
ha ha ha
Our generation paid off the debts incurred to pay for WW 2, and we did better than anybody else in history!
The debts from WW2 were the greatest gift if the greatest generation to the boomers.
Don’t let the Fascists win now!
‘The government debt that Germany and other core countries are issuing is simply bolstering peripheral debt that was, in all essentials, used to buy goods from Germany and the other core countries. It’s like fiscal expenditure at one step removed – without the feared inflationary implications for the ever-anxious core.’
With this paragraph, he trashed his own argument.
Oh, and the European dream has already failed.
Oh, and also, it’s not a surprise for this article to originate in Dublin.
A sovereign that does not print its own currency (such as Germany) has three sources of cash: taxes, net borrowings and net imports. (OK, I’ll add counterfeiting to be perfectly correct) To the extent that net borrowings and net imports rise, taxes would necessarily fall, all things being equal. Mr. PP claims to know for a fact that the German peoples’ taxes are not affected by its other two categories of cash flows. Unfortunately, this mathematical equation is not something that economists can alter to fit their theories.
is it possible for a Sovereign to counterfeit its own debt?
I don’t think so.
peope still think like they are in the Middle Ages, IMHO.
Curiously, I meant to write “money” in my above comment, but wrote ‘debt”….there is a difference, isn’t there?
debt can be forgiven, but money is forever.
Can a Sovereign counterfeit its own currency??
And wouldn’t “countefeit debt” simply be a promise which was never meant to be kept, ever?
And don’t some who comment here feel that way about any debt issued by any Government?
I mean, I see many who refuse to credit the Government on these threads, as to anything they say, not just as to promises to re-pay their borrowings.
You have to say how I trashed my own argument if you want your comment to be taken seriously.
“To the extent that net borrowings and net imports rise, taxes would necessarily fall, all things being equal.”
What are you talking about? Taxation is wholly determined by the government. It has no direct relation to net borrowings. If I were a government I could borrow loads of money and spend it on infrastructure or whatever. I could then raise taxes to curb inflationary pressures — or I could cut taxes and allow inflationary pressures to build.
Taxes are not an endogenous variable. They’re determined by government. As is borrowing.
You sir see lots of trees and cannot put them together to make a forest. You just plain don’t understand accounting. Since money is fungible, it is a mathematical certainty that you cannot tell whether taxes have been raised. As usual, you construct a theory based on a group of arguments, and when someone criticizes your logic, you instead try to turn the argument to a discussion of your arguments. 4 plus 3 does not eq
Impenetrable.
Thank you. I was struggling for the word to describe you. It’s precisely why I just quit writing in the middle of a sentence. Please feel free to not take me seriously and refrain from responding to my future comments.
“To the extent that net borrowings and net imports rise, taxes would necessarily fall, all things being equal”
if by “all things being equal” he means government cash or spending levels, then this is correct for a country not printing its own currency.
I don’t get this. How do taxes fall by necessity in any circumstance? A government determines taxation. They can impose taxes as they please. They can tax a lot or a little in any circumstances.
Taxes are discretionary. They are levied in order to hit budget targets. But they ARE discretionary, even in a country with a non-sovereign currency.
Now, if we’re talking about tax revenue, that’s something quite different. A government cannot, of course, determine tax revenue. They can try to hit targets but there’s no guarantee that they will. But this is something altogether different from taxation per se.
Sorry Phil, all you do is get into arguments with the majority of NC readers. This thread is a perfect example. If your definition of being taken seriously is getting into arguments with virtually everyone about why you are wrong, then I’ll pass on it. Actually,I don’t care if anyone takes me seriously. I understand mathematics and logic and you do not. (Not to mention the English language which you challenged me on previously.) So, bottom line, please Phil, do not take me seriously and refrain from responding to my posts in the future.
I have my problems with Phil, but this response was petulant, foolish and extraordinarily delusional.
My suggestion, which you are of course free to ignore and pass over, is that you maybe take a second consideration of your mastery of mathematics, logic and the English language (and also maybe acknowledge the impossibility of accurately judging Phil’s mastery on these same scores based on the few posts and comments he has made here). You are clearly no slouch on any of these fronts, but my experience has been that it is still possible to be overconfident even if you are quite intelligent and learned.
European taxpayers are indeed paying the bailouts, not just the so-called “bailout” (debt trap) of Greece (arguable) but the bailout of the Irish banks for example is indeed being paid by Irish taxpayers, who are deep to their necks in debt for many generations (or until formal bankruptcy saves them from neocolonialist slavery).
I understand that this is a different point of which Philkington is trying to make, because Philkington is talking to the Germans, not the Irish, as if the only “European citizens” would be them (sure: the rest have become “European slaves” as of late) but the Irish case, specially if contrasted with the Icelandic case (the best counterpoint) shows two very different destinies for two different ethnic subsets of “European citizens” and “taxpayers”: Icelanders are not paying too much for the bailout to the banks because they rejected to bailout them 100% and only covered their debts selectively (wise move), instead the Irish have been burdened with the biggest load of debt burden any European nation has seen since at least inter-wars Germany because they bailed out the banks 100%.
So Irish taxpayer are paying the bailouts, not the bailouts of their own consume (not really) but the bailout of German financial and industrial empire by means of saving banks’ assets that would have otherwise heavily impacted German (and British) banks and economy. The Irish, a small people, are saving Germany and Britain together.
For how long does anyone think this farce will continue. Banks should not be bailed out, only current accounts and saving accounts up to a low level should be guaranteed by the states, all the rest is private risk. This is what has not been assumed neither in the USA nor in the EU (only in Iceland): private risk is being burdened on the working class, the producer and every day more and more also the only remaining taxpayer.
This is unsustainable but has nothing to do with the racist imperialist fiction of “Germany bailing out” anyone. If anything it is Germany who is being bailed out by the Irish and other less fortunate peoples without a social state worth that name (Southern Europe mostly).
The taxation and asset-stripping currently going on in places like Ireland — where I live, so I know this well — are being undertaken under the guise of the austerity programs.
These aren’t part of funding the bailouts per se. They’re more like a ‘punishment’ being enacted on the periphery by the core countries. In the article I am implicitly arguing against these programs.
The best way to think about this is to think of the bailouts in the US. Imagine most of the bank were in New York state. Now imagine the federal government bailed them out but enacted an austerity program on New Yorkers to punish them. Would the New Yorkers be paying for the bailouts? Not really. The federal government covered that. The New York austerity program was a political decision. Ditto for the PIIGS.
Although citizens do not “directly” pay for bailout, the tertiary fingers of real payment extend far in to the future. The devaluation of currencies by goverment creation of saviour fiat diminishes the value of the currency thus imposing a figurativ tax on citizens through inflation. In addition, the money going to bank/investors, the wealthy, only accentuates this inflation by speculative “bets” on commodities that drive their price up further. This does not even concider austerity. Finally,these “stimuli” are only actions of dire strait nations that are trying to survive, ie stimulating a junked out junky. They do nothing to stimulate an economy except to add to GDP for a few post stimuli quaters that eventually leave country recipients less well off, and more addicted
That’s because it’s monetary, and not fiscal, stimulus.
The result is hoarded cash and asset price inflation: stagflation.
Hire the unemployed to do public works and services.
This is the most correct statement I found here. The idea to not let countries fail on their debt simply pulls the core down after a certain time. Of course, there is the possibility of printing money but in that case too, the citizens of the EU will lose (covered up default). One who invests and misjudges the risk associated with those investments (i.e. loans to countries) must be made to accept the losses when they should occur. Anything else is a serious fault in the system.
The Western Society is built on the RULE OF LAW. Over the past few years the spirit of this rule of law has been violated in the most serious way and repeatedly without end in sight. Once you start to go down that road, it is very hard to stop. Transfering losses of the private sector to the tax payer, whether throu bail outs or currency devaluation or any other scheme is undermining the fabric of Western Society and all that a few can continue to benefit with their perky jobs. The question remains how long it will take the the political backlash will happen and those responsible for this grand theft of all times will see prosecution at the hand of the mob. History might be a guide in this.
Good comment.
i note the AIG bail-out was undertaken without statutory authority, was it not?
Sure, debt guarantees approaching quickly the size of Germany’s GDP will be tax payer neutral. And what is the argument about raising taxes will be a political decision? Sure, you can also cut spending, does this really make any difference to the argument?
The taxpayer cost has to be put into relation to the solution with would cost taxpayers least in the long run:
* Let the Euro fail
* Nationalize the insolvent banks and apply punctual and partial bond guarantees to avoid chain reaction effects into the real economy
* Privatize them again on the capital markets once the crisis is over
With this solution, taxpayer, bank shareholders, and bondholder share the burden to fix the credit crisis.
With Mr Pilkington solution, the burden is on the taxpayer alone.
“The German citizenry have not incurred a ‘PIIGS tax’ to fund the bailout”
I think we all need to defend Greece against Germany but this whole idea is just full-force ideology. The German citizenry is paying huge price to save German banks from going bust.
The Impossibility of all Economic Logicv
say you earn 100 and you get taxed 30. Your purchasing power is impaired by 30.
Let’s say you earn 100 and then your govermint borrows 100000000. If it spends the 100000000 on nonsense then it inflates your currency and impairs yur purchasing power by 30 if your wage doesn’t go up by inflation. Same thing as a tax.
If it spends the 10000000 on something useful, whatever that is, then it might foster enough social stability to allow your business to prosper and yur income to go up. And it might make your wealth go up == if you live on a natural gas field. you’re wealth might go waaaay up if the govermint spends 10000000 on things that use natural gas or need things that are made using power. Even if your income-based purchasing power goes down, your wealth can go up and your overall purchasing power is enhanced not impaired by the tax.
No way to really know what the impact will be of debt or taxes. There’s an income impact and a wealth impact and they can be positively or negatively correlated — at widely variant magnitudes-== and for difernt groups within the society—, depending on the impact of the debt or tax on the social stability and social institutions that allow for income or wealth to exist at all.
It’s all mathematical metaphysics with 16 equations and 19 unknowns.
and not only thgat (*) but wealth is simply the money wave collapsing on property: and the money wave is part Imagination — f(I,C,L) = M-wave — which is beyond formal mathematics. where c= capital and L=labor.
Consider if your property is oil. Then the money wave collapses to zero unless there exists the internaal combustion engine which is f(I), in which case the money wave collapses to 1000000000. That’s what happened to the Berverly Hillbillies and the Saudies.
With Batman it happened when the Joker did in Batman’s parents.
Same thing!
This is one of the strangest articles I’ve ever read. It’s sort of like listening to the EU leaders: it takes a while to figure out what he’s trying to say (because it’s too preposterous to believe he’s saying what it appears) and then you realize he might actually be serious and you just go away shaking your head. I think his whole analysis is one of the reasons we get into problems like this (but maybe he’s just joking and testing to see what nonsense will be taken seriously).
The argument made by this post is nonsensical.
As long as the overarching “no bondholder left behind” policy continues, it is self-evident that some European taxpayers, somewhere, at some time, will have to pay for the bailouts.
Phase 1 involves strip-mining the taxpayers of the periphery. When that fails, in Phase 2 the taxpayers of the core will be assessed the remainder of the bailout bill. Whether the form of taxation in Phase 2 is overt or covert (inflation) makes little difference, because the end result will be exactly the same.
It is either the above (i.e. extend and pretend) or a wholesale simultaneous restructuring of the entire European banking system, wiping out bank equity holders on a Friday and handing the keys to the banks to their bondholders on the following Monday, after writing down the value of the bonds to say 80% of the true value of the bank’s assets.
To claim that neither taxpayers nor bank bondholders will not bear any cost for the bailouts is to claim the discovery of a fiscal perpetual motion machine. Utterly ridiculous.
Moral outrage has often been harnessed as an engine of tyranny.
There’s nothing “immoral” about borrowing money.
It’s not immoral, but it is a personal decision and people are responsible for the consequences of their decisions. There can be conmen involved, but people who don’t consider their ability to pay beyond making rosey assumptions are periodically going to get into trouble. There’s enough blame to go around in this one, but perhaps a little more prudence on the borrowing front in future will help everyone.
There’s nothing “immoral” about borrowing money. aet
What about borrowing from a counterfeiter?
Being foolish is not the same as being immoral.
in fact, how can any corporation or government be said to be immoral – for morality is a personal quality, not one which applies to groups. for a “group” by necessity is an abstraction, and abstractions are not moral actors.
Perhaps you see a difference between morality (personal) and ethics (group)?
It seems to me that law, when it works, emerges from societal ethics. And ignoring/subverting law because of degraded ethics is largely what has collapsed our financial and political systems.
It was by ignoring the principles of law that our Supremes could declare corporations to be persons. And if corporations are indeed persons, then they need to not only hew to societal ethics but also to personal morality, a logistical impossibility.
But from the opposite end, I think we encouraged sociopathy by declaring that corporation’s sole mandate is money/profit. No group should be allowed to function throughout society on only one internal-focused action.
Gee, another vague metaphor advanced as a reason n jot to help suffering people.
I think responding to this comment — which is the clearest on here — will address many of the issues raised.
First of all, the Eurocrisis isn’t just about banks. It’s also about sovereign debt. Even in places like Ireland it has now, broadly speaking, become a problem of sovereign debt — even though it really had to do with the banks. To suggest that the EU don’t bail out the banks is no longer politically viable. This may be unfortunate but it’s the reality. So, now anyone advocating that fiscal policy is curtailed by the ECB is implicitly arguing for austerity. That’s just the reality of the situation in Europe now. People need to be very clear on this. Because even if they don’t like austerity arguing in this fashion is implicitly arguing for austerity.
“Phase 1 involves strip-mining the taxpayers of the periphery.”
What you’re talking about is the austerity programs. These are being implemented in order to ‘pay back the Germans’. Once again, that’s how its viewed over here.
“When that fails, in Phase 2 the taxpayers of the core will be assessed the remainder of the bailout bill.”
No, be specific. If that fails government debt from the core will be used to float the bailout bill.
“Whether the form of taxation in Phase 2 is overt or covert (inflation) makes little difference, because the end result will be exactly the same.”
So, you’re worried about inflation occurring in Germany because they funded the bailout? How will that happen? Explain the mechanics to me.
In Europe, as elsewhere at the moment, deflation and recession seems to be the big threat — not inflation.
“To claim that neither taxpayers nor bank bondholders will not bear any cost for the bailouts is to claim the discovery of a fiscal perpetual motion machine. Utterly ridiculous.”
It’s not ridiculous. If the bondholders don’t bear any cost — and I should be clear, I think they should bear some cost — the charge will go to borrowing backed by government debt. This will not be directly ‘charged’ to the taxpayer.
If the taxpayer is eventually charged to reduce this government debt that will be a separate decision by a sovereign government. Will it be influenced by the bailouts? Maybe. But that doesn’t mean that the bailouts will determine taxation policy. Taxation policy is a more complex creature than that.
We are experiencing inflation and delation simultaneously, depending on the asset class. Inflation happens in Germany just like any place else through the the supply of Euro currency increasing. After all, they represent a large percentage of this supply as the top economy. The price of oil and agricultural goods have increased in Germany just as everywhere else. They are not as injured from this as other members because they have maintained their manufacturing base, and implicitly tied economic growth and jobs to this end as strategic plan. There are structual problems with the present capitalistic system caused by excess leverage, especially since the decimation of Glass Steagull in the U.S.. The experiment didn’t work for longterm stability of capitalism. I have thoughts on how it should be corrected, but it should not be for this reply. Let me just say that unless your wealthy, you should be hoping the FED and big banks are broken up and Glass Steagull reinstated.
“We are experiencing inflation and delation simultaneously…”
Impossible. At least it’s impossible if you define inflation correctly.
Not impossible if you had also read the second half of the sentence.
CPI is a bullshit aggregate that’s mostly used for political purposes, what matters is the price inflation of goods considered individually. (Sure, there’s substitution and the like, but that’s irrelevant for the argument Dan G. makes.)
Yes, and I obviously think that the latter is an incorrect definition.
And that’s fine, of course, but I think I’ve missed the post where you give your definition of what does and doesn’t count as inflation — and I suspect Dan G. has too.
Boy oh boy , people commenting here would let people starve to “prove” their asinine cruel and heartless eartless “moralizing” correct.
Our machines have reduced the need for humans to toil, and these commentaters would doubtless find that ‘immoreal”, too, as in their eyes, deprivation builds “character. “.
Just l
You really want to know what’s “moral”?
Sharing what you have with others who have less.
It is not only “moral”, but useful, natural,a
You know what’s immoral? not helping others who have less than you, because “it’s their own fault”, or “it’s not my problem’, or ‘i don’t know them/her/him”.
Chimpanzees are more moral than those people who let others suffer when they have enough to help:
See here:
http://www.nytimes.com/2011/08/09/science/09chimp.html
This from this same thread, 8:04am this morning –
Moral outrage has often been harnessed as an engine of tyranny.
Are you feeling morally outraged now?
Justice may seem “tyrannical” to the unjust.
You afraid of police because they’re armed?
Chimpanzees are more moral than those people who let others suffer when they have enough to help
—-
This, unfortunately, is the darkside of parenting that most of us don’t want to talk about.
Perhaps we should reform our parents first.
‘You had enough strength to help me! You had! You really did! Why did you let me fall down when I tried to learn to walk?!?!?!?!?!?!’
Boy I can see that you like to help people by kib cking them when they’re down.
Why do you hold poverty in such contempt?
This here be a Phil Pilkington Fourth Pint Post….And it goes a little somethin’ like this:
Pilkington is at an Irish Pub discussing weighty issues of the day, and of course, the EU situation comes up.
At first, the conversation is pretty tight. You know…basically, “Germany can’t have it’s cake and eat it too” kind of thing.
OK, fine.
But then, Pilky hits his fourth pint in less than 90 minutes.
Try as he might, Pilky just can’t keep the focus.
“EU taxpayers are not paying for the bailouts of the European periphery. BTW: You know that Tom Friedman? He composes garbled stew prose.”
“Oh, OK. Thanks for that tidbit on Friedman, Phil. Anyways, back to the European situation…if taxpayers are not paying for the bailouts, then who is?”
Pilky takes another 4 ounces from his rapidly diminishing pint…”Qwesschunn: Is Otmar Issing an anti-EU nationalist?”
“Ah, gee, not sure about that one, Phil.”
“Well I would be fine if he is. I think anti-EU nationalists have re-spec-ta-ble opinions. Respect, I say. R-E-S-P-C-T-E. Find out what it means to me!”
“That’s great, Phil. So anyways, back to Europe. If taxpayers aren’t paying for the bailouts, then who is?”
Pilky empties the remainder of his mug down his gulley. It’s not enough to get this flow of liquid from glass to throat by merely tipping his mug slightly above perpendicular. Hell no. In fact, inverting that mug to a 90 degree right angle isn’t sufficient. No, Pilky is in full back-arch mode and he has that bad-boy beyond inverted as he sucks down the last remaining drops of nectar.
Upon completion, he slams the mug down on the table, looks his interlocutor directly in the forehead region and answers the question of how these bailouts are going to be paid for, thusly:
“Drop your crassss moral-eye-zing about profligates and stoics. It’s nonsense. It’s nothing but a stupid, crassss way of looking at the situation in Europe that serves no purpose…’cept maybe to increase the animosity between football fans.
“Next Qwesschunn!”
You’re saying that I can’t argue coherently and then you write this:
“No, Pilky is in full back-arch mode and he has that bad-boy beyond inverted as he sucks down the last remaining drops of nectar.”
I’m in full ‘back-arch mode’ and I have ‘that bad boy beyond inverted’. In your head that may have sounded clever. But it comes out looking like you’re a wannabe James Joyce suffering from aphasia. I can write clearer than that after eight pints, let alone four!
Actually let me shine a little light into your impenetrable mind and give you a few tips on how to clean up your prose.
Okay, your key problem is that you write for yourself rather than for others. You seem to be gaining intellectual pleasure from making up terms. That’s fine — although it is a bit like masturbating — but other people don’t process terms such as ‘full back arch-mode’ easily so it’s better to write something like ‘Pilky sits with his back fully arched’.
Note that I didn’t need to coin terms to express myself — a reader will appreciate this. If you need to make up terms with no other goal than to construct a sentence its usually a sign that you’re not in control of the language you’re using.
Don’t use metaphors without first introducing them. This makes you appear to not know the definitions of the words.
Example:
“Pilky empties the remainder of his mug down his gulley.”
A ‘gulley’ is:
=======================
— n , pl -lies , -leys
1. a channel or small valley, esp one cut by heavy rainwater
2. ( NZ ) a small bush-clad valley
3. a deep, wide fissure between two buttresses in a mountain face, sometimes containing a stream or scree
4. cricket
a. a fielding position between the slips and point
b. a fielder in this position
5. either of the two channels at the side of a tenpin bowling lane
======================
Let’s assume that you’re trying to use definition three here. What you should be trying to do is compare my neck to a gulley — not state that I possess a gulley, that’s just weird. In fact it reads a bit like Burgess’ Alex speaks in ‘A Clockwork Orange’ — which was, of course, a parody.
http://www.youtube.com/watch?v=IHwRVieCe2I
So, maybe something like: “Pilky empties the mug down his neck which yawns open like a gulley to allow the intoxicating liquid to enter”.
But be careful. People might think you’re just trying to sound artistic here. They might accuse your prose of being ‘purple’. So it might be better to avoid this altogether.
Remember kids: you may think you’re an artist, but chances are others just think you’re a smart ass clown.
That’s all for today Dan. Think about that for a while. And above all else: practice and have other critique your work.
A slightly more charitable reading of Dan’s post would be that he’s suggesting that you have a tendency to go off on/insert tangential arguments, sentences and/or paragraphs.
Maybe. Or maybe he cannot follow my argument.
Doesn’t take away from the fact that Duncan is a wannabe writer with terrible control over his language and a sour attitude.
re the latter: i have no idea.
Golly about the Gulley, Phil.
Gulley, Gully….OK got it.
——-
Hey, but next time you’re at the pub slamming pints, go ahead and order
http://en.wikibooks.org/wiki/Bartending/Cocktails/Glossary
Gully Wash
1 part sweetened condensed milk
1 part coconut milk (traditionally, it would be the “juice” straight from the coconut)
1 part gin
Blend the above ingredients, adding the sweetened condensed milk last. Serve over ice. Gully Wash is a Bahamian drink – not a tourist drink, something enjoyed by islanders.
——
But c’mon Pilky. Don’t take it so personally. How do you expect anyone to take you seriously if you take me seriously.
Shit…the way you responded, one might think I tripped a wire and that you do hit the sauce a bit hard. Ease up there, Tiger. OK?
Oh, and one more thing: I’m not the one with pretensions here, Pilky. I’m not the pretender-journalist out his depth “teaching all of us about Economic Theory”…while slamming “my colleague, Tom Friedman”.
I’m just a dude f*cking around on a blog over a cup of coffee in the AM.
And considering that I got under your skin to such an extent that you actually took the time to look into the etymology of gulley, on my account…well, means I’m doing a pretty good job of it.
Bottoms Up!
Honi soit qui mal y pense.
PS Phil – don’t feed the trolls, they’re just poisoning the discourse. They’re not looking to help anybosy.
ignore them, they go away.
The relevant question, still, is why the Irish aren’t out in the streets — and remaining there — until the bullshit stops.
The government buildings are surrounded by nice iron fences. Not a good option for anything but scuffles with the guards. A much better option would be to occupy Grafton and the narrow streets adjoining it. 10 to 20 thousand Dubliners could easily make quite a scene.
A few weeks ago I was talking to a friend in Dublin and she thought that Fine Gael was “trying” to do “something” about the bank guarantee and the austerity programs and so people therefore haven’t hit the streets yet. As Yves would say, Earth to base!
Except for a few socialists and that guy from Achill with the cement truck, why haven’t people taken direct action yet? I just don’t understand.
It is a waste of precious time to impose austerity first on consumers and let it trickle down to producers. This is done to protect the global corporations, give them a back door to scoot off to Asia and wherever to sell their stuff. And keeps them from having to pay up before they leave. If austerity started with the producers who have flooded the market with too much unsellable crap, say make them take it all back and recycle it, and pay people a good wage to do so, then we wouldn’t have such an illogical disconnect nor put consumers at such an impoverishing disadvantage. But obviously we are not going to do that so we fudge it by monetizing debt. Its the next best choice. Even if “growth” as we once knew and understood it is over. Done. Printing money to wind ourselves down is really our only choice.
Quantitative easing does seem to be the preferred choice of big money.
Central Bankers Confront Which Risk Scares Most http://www.bloomberg.com/news/2011-08-08/central-bankers-confront-decision-on-which-economic-risk-scares-them-most.html
Central bankers from the U.S. to China may have to decide which is their worst nightmare: the Great Inflation of the 1970s or Great Depression of the 1930s. As stock markets slump worldwide and the global economy sputters, monetary-policy makers are struggling to come up with new strategies to spur growth. …
Recoveries from financial crises like the one the U.S. and the world suffered through in 2008-2009 historically have been slow because it takes time to work off the debts built up during the boom years, said Carmen Reinhart, senior fellow at the Peterson Institute for International Economics in Washington. “When we have the kind of combination of sub-par growth, stubbornly high unemployment and a big debt overhang, you need low interest rates,” said Reinhart, who co-wrote the book “This Time is Different: Eight Centuries of Financial Folly” with Harvard professor Kenneth Rogoff. “If I had to err, I would err on the side of ease,” added Reinhart, whose husband, Vincent, worked at the Fed. “The ‘30s was a lot uglier than the ‘70s.”
FOr those correlation happy:
The Great Depression was observed to be followed by growth and happy days in the late 40’s, 50’s, 60’s and early 70’s.
The inflation of of the middle and late ’70s was observed to be following by a sharp recession and unhappy days in the early ’80s and more temptation to fudge inflation calculation even since.
The money has to come from somewhere, even if it’s just the ECB’s imagination ;-)
What are the alternatives to taxation?
http://www.cartoonstock.com/newscartoons/cartoonists/bro/lowres/bron2360l.jpg
http://esharp.eu/var/esharp/storage/images/media/images/eurobond-cartoon.web/125334-1-eng-GB/eurobond-cartoon.web_imagelarge.jpg
http://nicholsoncartoons.com.au/wp-content/uploads/2011/02/2010-11-06-banks-print-money-profits-600.jpg
Yeah, but three cartoons eliminates the need for 3000 political debates and at least 3 million words on the subject. What fun is that?
Government debt does not get repaid. Look at US History, the only time the government repaid the national debt (Andrew Jackson), the country went into a deep depression.
The debt is being issued to cover EU government spending. Without that spending, Europe would be even deeper in crisis – the drop in private spending has to be filled otherwise a deep depression would result.
The idea that this would somehow “cleanse the system” by eliminated bad private debts sounds good in theory, I hope we realize that the reality would be that those who can’t afford good lawyers would be the big losers.
Note that in the US, the high-tax states “subsidize” the low-tax states via federal spending. California receives about 80% of its federal tax burden in government spending. Other states (primarily in the South) receive over 150% of their federal tax burden via government spending.
This is one effect of a federal fiscal policy (whether or not we agree with it is a different discussion). It is a recognition that there is a public economic standard that must be met as part of being a nation.
That redistribution is determined through the sausage factory known as Congress – at least there is some transparency in that process (not enough, but some).
Europe has no such mechanisms – they were founded on an assumption of continual growth.
Note that countries that joined the EMU had their past national debt recast in Euros at the then prevailing FX rates (obviously, the old national debt wasn’t zero and it isn’t being paid in the old currency). Given that the Euro is stronger than the old national currencies, that means that old debt is an even greater burden on those peripheral nations.
Bond holders of that old debt are getting a free ride on an strong Euro – no doubt there would have been sharp devaluations of the previous currencies if those nations had not joined the EMU.
How you can have a national currency, but no debt issued by the EU as a national entity astounds me.
Anyone who talks about lazy nations and that they have to take their medicine for borrowing too much has zero credibility.
Basically, the question is whether the Central Bank is part of government or not. If it isn’t – to whom does it answer?
Exactly. Particularly this:
“Anyone who talks about lazy nations and that they have to take their medicine for borrowing too much has zero credibility.”
Most people have not thought through the implications of these bailouts, so focused are they on whether they are ‘right’ or ‘wrong’. Let’s understand what they ARE first — then we can talk about the morality or whatever.
Government debt does not get repaid. Look at US History, the only time the government repaid the national debt (Andrew Jackson), the country went into a deep depression.
——
I take it from this that the government didn’t not repay the national debt the other occasions we had a depression.
So, there were many depressions in this country’s history. All of them, except one, were associated with our not repaying the national debt.
Is that correct?
Are we to conclude that a depression could occur with or without repaying our national debt?
Warren Mosler has the following in his email signature:
“The 1998-2001 budget surplus was the longest surplus since the 1927-1930 surplus. Coincidence?”
I think there’s something to it. Recessions and depressions often do follow on from governments trying to run budget surpluses.
Wray is very good on this:
http://www.creditwritedowns.com/2011/06/goldilocks-crash-financial-crisis-history.html
Sorry, but that’s just wrong, insofar as it’s a suggestion as to a ‘reason’ for the problems then. The reason for the Clinton budget surpluses was simply that the dotcom-bubble was inflating at full speed, and that this increased taxes a bit during the boom years. This was immediately used by Bush to argue for tax reductions, but the fact that there were surpluses had little to do with fiscal policy, and everything to do with an asset bubble inflating. That is, people invested in the bubble because people had no other place to invest their savings that generated RoI/E, while “everyone knows” that it’s no good to let your money “do nothing”.
Ugh@own grammar.
Let’s try again, without grammar this time.
1. The budget surpluses were caused by the dotcom boom resulting in temporary higher taxes, not fiscal policy choices.
2. The dotcom bubble was part-caused by lower interest rates leading to more lending, and part-caused by the fact that the lower interest rates made saving less attractive, and forced people onto the stock market (this is something that started in the mid-1990s; i bet Clinton’s fucking with the pension system also had something to do with it.
3. the surpluses that were there thanks to the boom were used by Bush as an excuse for lowering taxes; creating even more instability.
Clinton also took credit for doing Keynesian Counter-Cyclical Fiscal Policy, just to give a highbrow econ reason for taking all our tax money in a hot economy.
The fact that some places may intentionally do Keynesian Counter-Cyclical Fiscal Policy may also account for these “tax caused recessions” that Warren the Wizard may have uncovered in his research of data in other places.
btw, I think Warren hangs out at the beach cabana down there in St. Croix. They have a drink called a Hurricane and the bartender usually guarantees you can’t finish two.
They also come with those tiny umbrellas in them and the umbrellas are purple with a really trippy green spiral on the top.
I bet some of Warrens best work is done after four of those and spinning the umbrella in front of his eyes and seeing the money illusion.
Are you saying the 1998-2001 budget surplus led to the ‘good times’ around 2003-2006?
You can connect all kinds of dots.
All I see here is attempted correlation, not causation.
Neither Mosler or I are implying causation. It is a pure correlation but one that holds up quite well: budget surpluses often precede recessions.
The cause of these surpluses or whatever can be anything.
The danger is tring to apply mere correlation to anything at all.
It’s bettter to not mention it in public until after one establishes causation.
“mere correlation”?
What else do you have to indicate relation?
Insight based on religious teachings?
Correlation may not be sufficient, but it’s abig fat clue, like a red hand pointing a finger at something worth examining.
You say,”Oh it’s only correlation, ignore it….”
Tell me, how does one prove causation withoiut showing a correlation?
It’s a free lunch, sweet! Also, ponies for all.
Get back to work, you mixer.
Philip, how does the Maastrict Treaty feel about bailouts?
Why don’t you do the research and tell us insdtead?
PS – include citations!
“Banks must face new taxes to avoid repeating the ‘unacceptable’ bail-outs of failed banks that cost taxpayers billions, the European Union’s chief financial regulator, Michel Barnier, warned.”
“Under a second bailout, the share of Greece’s debt underwritten by foreign taxpayers (via the EU, ECB and the IMF) will go from 26% today to a massive 64% in 2014. Put differently, each household in the eurozone today underwrites €535 in Greek debt – by 2014 and following a second bailout, this will have increased to a staggering €1,450 per household.”
“Rising public anger in northern Europe at a series of taxpayer-funded bailouts is sending tremors through the political landscape, boosting anti-euro parties such as the True Finns in Finland and sparking policy rows in Germany. The emerging consensus that Greece will have to restructure its €327bn in sovereign debt, in spite of the EU/IMF rescue it secured one year ago, has made Europe’s promise to delay any private sector pain until 2013 look increasingly untenable.”
Of course this money doesn’t come from taxpayers, it either falls out of the sky or is found in little pots at the end of rainbows.
Did you even read what you just pasted?
“…the share of Greece’s debt underwritten by foreign taxpayers…”
“…each household in the eurozone today underwrites €535 in Greek debt…”
They don’t pay for it, they UNDERWRITE it. Do you see the difference? It’s really quite important.
Yea, first they underwrite it, then they pay for it. They pay for it in taxes, they pay for it in fees, they pay for it in bank charges. They pay for it in inflation which I believe is the latest scheme, plan F. Plan F = ECB buys everything in sight and hope inflation makes it all go away. The Germans have had a ongoing surtax for years as they pay for the failed socialist state of East Germany. Total so far?
Two trllion Euros.
That oversimplifies the situation.
First of all, any tax that is imposed is a political decision. They could choose not to implement the taxes. That’s up to the German government. You can cut this any way you want: AT THE END OF THE DAY THIS IS A SEPARATE AND SOVEREIGN DECISION.
Secondly, it’s bigger than that. As I tried to show in the piece: the periphery deficits were run to provide a consumption base for goods produced in countries like Germany. So we need to look at this as a big picture. What were/are these deficits funding? Are they necessary for the core countries? Etc.
Germany’s top export partners in order: France, Netherlands, US, UK, Italy, Austria, Belgium, China, Switzerland, Poland. Spain, Czech Republic, Russia, Sweden, Turkey, Hungary, Denmark, Japan, Brazil, Korea, India. Only two little piggies.
Who ran them as a consumption base? The Eurocrats, the sovereigns? What stopped Portugal or Greece from becoming an exporting nation?
Perhaps I put it badly. By inducting the periphery countries into the union it was inevitable that they would have to run deficits because they could never have hoped to compete with the German export machine.
As I put it in the piece:
“And so we’re brought full circle. We have just highlighted one of the key reasons that the economic union was set up. In a successful economic union all the members could allay themselves of their economic anxieties – whether they be the very real anxieties of peripheral poverty or the semi-imaginary core anxieties about runaway inflation – and work together for the greater good.”
The idea behind the union was to work together as a single integrated economy. The periphery served Germany as willing importers. This would help increase their wealth etc. but it was inevitable that these countries would have to leverage in order to do so.
You’ve got to look at this from the point-of-view of the union that all these countries signed up to.
I actually think that you’ve pointed out something I got wrong in my argument above. Although it doesn’t really affect the over-arching argument.
I knew there was a threat to Germany’s exports were the Eurozone to tank but I made a mistake in what it was.
In fact the threat is that, if Germany wreck the periphery, the Euro will likely collapse. If this happens all the other European currencies will devalue vis-a-vis the new DM. Since Germany relies on Europe for 60% of their exports this would immeasurably damage their economy.
What the Euro provided Germany with was a fixed exchange rate that ensured they would have lots of exports. To get this Germany had to allow the periphery to be able to but its products and all that that I mentioned above.
So, my earlier argument was wrong (on the periphery — the main argument regarding taxes still stands). Good call.
What stopped Portugal from remaining as a exporter nation?
The euro.
Not because of the common currency as such but because it’s a currency designed for the dreams of Germany (German capitalist class mostly) and not at all for the needs of Portugal or in general most of EU. If the euro would be lower in comparison to the US dollar (the ‘gold standard’ of our time), then Portuguese industries would not have closed (and the same for all Latin Europe, including France). But the euro has been designed as a Deutsche Mark of sorts and the hyper-strong DM is not good to have or Portugal nor almost anyone else. That’s why Poland and the others won’t enter the euro, even if they are theoretically obliged by their EU-entrance agreements: it’d be suicidal, it’d destroy all their competitive advantage for nothing.
The German capitalist class pretty much likes low value on the Euro as it makes their exports cheaper. They have enough problems competing with the Asian tigers, China and now India waiting in the wings. They have no love for an overly strong Euro.
This guy makes that case and also echoes your argument in a sense (EU good for Germany). That the cheap Euro does Germany far more good than an expensive DM (Deutsche mark).
http://peterlbrandt.com/germany-via-the-euro-has-the-world%E2%80%99s-cheapest-currency-2/
If that would be true, Viator, why the euro is so hyper-valued (roughly 45% up since adoption) and not at least in near parity with the US dollar?
It has been discussed in this blog (at least in the comments section) before: in order to make the euro a reality Germany imposed its model of strong currency that so well had worked for them in the past (because they export high tech high value stuff with little competence and import cheap raw materials or even parts they ensemble or even fully finished items they brand and cash).
The Volkswagen Polo is made somewhere with low labor costs, for example Spain, with raw materials or even parts that are even cheaper imported from outside the EU at almost zero cost thanks to the strong euro and then sold in or outside EU, maybe in the USA, at a big benefit that is mostly cashed in Germany.
But because the euro is so rigidly strong, the costs of workforce is not as cheap in Spain as in, say, Poland, so Vokswagen may decide to move their plant to this last country or maybe even outside EU, Morocco maybe? Why not Vietnam? (import taxes are so low thanks to WTO that almost does not matter where it is made except for the monetary policies and related labor costs – not only but largely so).
Now I notice, Viator, your article compares with the Swiss franc, but that is not the point at all (Switzerland is small state, even if somewhat important economically), what matters is the comparison with the US dollar and all the world currencies that buzz around it (notably yuan but almost all currencies, including the sterling pound – the Swiss franc is an exception, as may be the case of other European currencies like the Serbian dinar or the Polish zloti).
What would happen with those graphs if they’d be compared with the sterling? That the euro would be in the position of the Swiss franc in relation to the euro/DM, but instead of “only” gaining 20%, it would have gained 50%.
And that is a big problem.
€535 is still payable if it has to be shared by all European citizens but it is not payable if it is to be burdened only on Greek shoulders.
Greeks are just 3% of Eurozone’s citizens, so they are getting, I estimate, €15,718 per capita, which is indeed impossible to pay.
We all put our share to help Germany after unification, and to help the Central European and Balcanic new members. There is absolutely no reason why we should not help other member states when in need.
However I still recommend a well calculated technical bankruptcy and squeezing the rich non-taxpayers for a change. I do not recommend in any case cutting in essential social services, because that is just cutting the grass under the feet of stability, the main pillar of prosperity.
Exactly. But if you look closely at a lot of the arguments on here, they’re not even vaguely progressive. They’re all about me, me, me. “You cheated me now I’m going to trash you.”
The people making these arguments look like the saber-rattling types prior to World War I.
When it comes to Europe many NC readers seem to have a very conservative streak running through them. They aren’t into the whole ‘working together’ thing. Left-wing my ass — that’s all I’ll say.
Oh, dear.
Oh dear, oh my…
what the king thinks… http://www.cartoonstock.com/newscartoons/cartoonists/rma/lowres/rman1618l.jpg
what the neighbors think… http://www.cartoonstock.com/lowres/shu0470l.jpg
what folks at the cafe think… http://www.sunrise-center.org/images/KathRev-Judgmentcartoon.jpg
There has been a strong propaganda wave in English language in the sense you say.
I think more and more that all this is more or less concerted at NATO imperial levels in order to create a Germanic-centric New World Order (let’s not forget that a plurality of white US citizens are of German origin and a vast majority are Germanic in the German, the Anglo or the miscellaneous sense, Ashkenazim are also Germanic by culture if not blood). I know it sounds like weirdo conspiracy theory but I also know that in the Imperial World Order (new or old) each country has an assigned role either as central (USA but also Germany), midling (the likes of Spain or Korea) or colony (Nigeria, Iraq, Mexico). There is no fair play in international relations even if formally claimed.
So all the ideological blah-blah about the European crisis, which is not really any “debt” crisis but a crisis of the speculative bubble (in all aspects including speculating with Greece as a whole) and, specially, a crisis of the model of Europe (a horizontal Europe of equals or a hierarchical neocolonial Europe, a Europe of democracy or a Europe of the banksters) is nothing but propaganda. Propaganda that all the right-wingers and some naive neutrals swallow happily (because it fits their preconceived models of racial hierarchization, of trashing each other instead of helping each other, etc.)
They’re all about me, me, me. “You cheated me now I’m going to trash you.”
———–
I think we are all guilty of that.
Who among us doesn’t think ‘my idea, my idea, my idea. It’s all about my ideas. You obstructed my idea now I am going to trash you.’
And we like to moralizing but we complain about others doing the same.
The scariest part is questioning other people’s patriotism, sorry, make that, other people’s progressive credential.
Unfortunately underwriters get bitten when a bond issue fails.
If you remember 1987, it was triggered by a failed bond raising in Germany, pre-EU. I had a hell of a time as an FX broker at the time. All sorts of crap running across the Reuters ticker and the room wondering how we could moved to the right venue to take advantage of the yen – $US cross over.
Maybe the difference between underwriting, that entails no cost in your scenario, and the value of the implicit CDS could be raised?
Whenever I think Pilkington can’t get more ridiculous, I am proven wrong, as in today’s outburst.
Mr. P., let’s deconstruct the jerky you’re trying to get us to eat today.
“In a successful economic union all the members could allay themselves of their economic anxieties – whether they be the very real anxieties of peripheral poverty or the semi-imaginary core anxieties about runaway inflation – and work together for the greater good.”
Even ordinary “controlled” inflation is destructive to savings and incomes, unless wages keep pace (and taxes are indexed to inflation). Then it is only destructive to savings. Apparently workers and savers are supposed to sacrifice for the common good, on the Pilkington planet. But if part of community is being hurt, it is hardly common good, is it?
“To say that this is somehow morally wrong as Issing does is the equivalent of a New Yorker complaining about the profligacy of an Alabama resident. It’s one economy, stupid – and you take the good with the bad.”
Obviously you do not understand the American system. Alabama will suffer the pains of its own profligacy through higher state taxes or reduced government services. And New York — a liberal mecca — obviously has bigger spending issues than Alabama, using the metric of state deficits as a percentage of spending.
What is wrong with moralizing? There are moral issues here. These European PIIGS signed onto agreements as conditions of EMU membership, agreements about a reasonable level of fiscal propriety. Greece flat-out lied about their budget for years. Other countries routinely cheated on the terms they agreed to. Now you speak as if the injured parties are to ignore the cheating, and help the cheaters. What you’re suggesting is morally upside down and backwards, if agreements are to have any real meaning.
Yesterday I did read the FT piece by Issing, and in your haste to grind your favorite axe, you missed Issing’s logic by ignoring a practical point which is at the center of Issing’s argument. He wrote:
“EMU is based on rules enshrined in international treaties. The euro was created as a ‘depoliticised currency’ — its stability entrusted to an independent central bank with a clear mandate to maintain price stability. Any attempt to ‘save’ monetary union via agreements which transfer sovereignty to a European level, where violations of fundamental treaties have become a regular event, lacks any logic. In the end it will only further alienate the people from Europe itself.”
He is saying that the new bailout schemes, concocted by a bureaucracy that is not democratically elected, will de-legitimize his ultimate goal of a political union. “It’s [i.e. the Union’s] collapse would be brought by resistance from the people.”
So in fact he favors a united Europe, economically and politically, but only a democratically legitimate one. If the cheated are forced to bail out the cheaters, they will resist. They will withdraw. I am not European, but I find this to be a reasonable projection. Here in America, the voters of the fairly liberal state of Wisconsin rejected, just this week, the notion that ordinary taxpayers should continue to pony up for the unfair advantages and benefits finagled by the public sector unions for their highly paid employees. The people who ultimately pay the cost of these bailout schemes will rebel at the ballot box and in other ways. It doesn’t matter whether you think another course serves some notion of the greater good. The people will have their say. In the case of Europe, I doubt Germans can be convinced that they should suffer for the excess indebtedness of their neighbors. Obviously Issing, who is closer to the situation than I, draws the same conclusion. He is simply stating what he views as a reality. I think morality does enter into the question, but even if it does not, it makes no difference. In a democratic system, if you force people to accept what they do not want (for whatever reason), there will be a backlash, and in this case, it will probably destroy the very union that you and Issing both seem to desire.
I’ll address the parts that actually deal with my points.
“Obviously you do not understand the American system. Alabama will suffer the pains of its own profligacy through higher state taxes or reduced government services. And New York — a liberal mecca — obviously has bigger spending issues than Alabama, using the metric of state deficits as a percentage of spending.”
It was just a comparison, I didn’t look up who spends what in the state system. I just wanted to show that we’re dealing with a single economy.
If taxation and cuts are implemented in the states in the US this is a political decision. These could be backed by a federal deficit — isn’t that what happened in the bailout?
“Now you speak as if the injured parties are to ignore the cheating, and help the cheaters.”
Yes, because if they don’t it’ll tank the Eurozone and hurt everyone. Besides this ‘cheating’ was used to fund consumption of German goods.
“Yesterday I did read the FT piece by Issing, and in your haste to grind your favorite axe, you missed Issing’s logic by ignoring a practical point which is at the center of Issing’s argument.”
I didn’t miss his argument. What you quote is his opinion. Obviously I disagree.
“So in fact he favors a united Europe, economically and politically, but only a democratically legitimate one.”
He argues quite clearly that the central bank should not use fiscal policy. My argument was that if they don’t the whole thing will fall apart. The trade dynamics have relied on stimulus through deficits in the periphery for years. If this isn’t maintained everyone will suffer.
My key point — that you missed in your rush to trash my argument — is that Issing and people like him ignore this fundamental point. So, in calling for austerity in the periphery they are digging the grave of the very project they outwardly support.
I’m sorry if I was too subtle on that point for you.
Ed Harrison pointed out to me that our Fed has a sufficient mandate to actually buy muni bonds. You never hear these details so I was really surprised. My comment was, well then we really do not need Congress. The point being that there might be no such thing as a purely monetary decision by central banks. It is all politics no matter how you turn it or conceal it. I kinda think Trichet understands all this.
It seems to me that he has you accepting the point that “x nation’s people is bailing out y nation’s people” which you originally set out to establish is not the case. Maybe that’s because it intuitively would seem to be so.
I don’t know enough to weigh in on that point, but it also seems to me that his point that “X nation’s people shouldn’t be required to bail out Y nation’s people” also has some merit.
The comparison between Iceland and the Y nations, then, is interesting. Maybe the Y nations should make like Iceland and hold bankster and investor booty to the fire directly instead of finding themselves in the position where they need to argue that people in the X nations should bail them out of their austerity plans.
ie., it’s about having some political cojones. And about maintaining some pre-emptive defensive local control, in the first place, the next time the human refuse at Goldman Sachs comes aknockin’. Or the next time the local elites eliminate their tax bill. Or whatever.
Because it does seem to me that otherwise you can set up the kind of situation where the citizens of the X nations pay for the high risk con pulled in the Y nations. How is that “fair”?
Intuitively, that’s the way this would seem to work. I don’t know what happens to that intuition when you wave the MMT wand around and make “the bailout” cost just disappear, but while no one can figure out where you disappeared it to it seems reasonable to me to suspect that it didn’t really just go away either.
After all, we’re still talking about bankers, economists, and politicians, all wrapped up into a nice little package by academics. And none of those animals is trustworthy.
“There are moral issues here. These European PIIGS signed onto agreements as conditions of EMU membership, agreements about a reasonable level of fiscal propriety. Greece flat-out lied about their budget for years.”
Yes Greece did (with some help from Goldman-Sachs). But what about the other so-called PIIGS? You only wave your hands there. Spain, for example, was considered a model of fiscal propriety. What happened? A housing bubble, funded in large part by German banks and (since the capital account surplus is the flip side of the current account deficit) the excessive exports of German industry. Where were the Germans before the manure hit the fan? Were they complaining about the lucrative loans of their banks or the lucrative exports of their industry? Clearly German fiscal propriety was lacking by allowing their economy to become dependent on such an obviously unsustainable situation.
Total nonsense.
So austerity in Ireland isn’t occurring? The rising taxes on the working people are occurring? The string of new taxes scheduled, including a poll tax, won’t occur? The borrowing rates for the Irish govt didn’t increase? The interest expense of the Irish nation isn’t increasing? Money that would have gone to infrastructure projects isn’t being siphoned off to pay creditors?
Just because you have an intermediary, in the form of the ECB, doesn’t mean the debt isn’t increasing and will have to be paid back. The ECB can print money or the people of Europe through their govts are going to have to repay the loans at some point.
Your logic is the same logic of the ponzi scheme, and the same logic used to justify NINJA loans and all the other crap that landed us in this situation.
Extend and pretend, until you can’t pretend anymore
Yves, judging by the amount of negative responses here, I think you might want to give Mr. Pilkington a little less free reign at N.C.
Phil is correct, as a journalist. But my theories provide a theoretical rigorous framework for the pinhead, as my comments indicate. -JT Tremens, Abogard Professor of Intuitive Logic, Department of Sporting Goods, UofM ^()*()^
FN: nOT SAying Phil is a pinhead. I’m saying that my theories are for pinheads.
I always strive to be cordial and honest in my dealings here.
If I may make an observation of a particular correlation.
I notice that every time Philip makes a post, the thread is permeated with a lot of nonsense.
What causes it or who causes it? That’s a different topic.
Like our old friend Marshall McLuhan wrote “the medium is the message.”
too many Rene DesCartes graphs and the mind is softer than a bar stool drunk after 12 pints. And all the graphs, they all give the illusion of sobriety.
Theories for pin-heads? What about the bone-, block- and sh**- heads?
Did you ever think about them?
And what about the greed-heads, lots of them about arguing that poor people are that way because they deserve to be….how about some theories for them?
After all, people don’t live on bread alone.
I disagree.
I don’t agree with Philip’s arguments, but they are the same ones being made by the EuroCrats in Brussels, and it’s imperative that we’re all exposed to them, so that we can discuss.
And I applaud him for responding to as many comments as he did.
This is all semantics. What even is Europe? The Eurozone? The European Union? NATO? The European Economic Area? The Council of Europe?
Similarly, we often use the shorthand of Germany and Greece, but what are we talking about exactly? Their voters, their economies, their governments, their banks, or their kleptocratic elites?
Most of the time this doesn’t matter because the conversation suggests the context, but when we start drawing hard fast lines they do. We can certainly look at the relationship between the PIIGS and France-Germany-Netherlands or in the case of Ireland, Germany-UK. We can say they form one economy. Indeed we could remove all the lines and say the whole world is one economy, but leave that for now. Let us say that Europe, whatever that is, is one economy. OK, but politically it is not one polity and therein lies the problem.
As for a tax, isn’t it any government mediated transfer of wealth? And isn’t that what’s going on here? That is not a transfer of wealth from Germans to Greeks but rather a transfer of wealth that might have gone to ordinary Europeans to rich bondholders and kleptocrats.
Actually EU is a polity, even if a sui generis and weak one. It is a confederation: have no doubt about it.
Ja, it is all in the Treaties.
Humans can’t even gather together to create a nation that works for the majority of its members for more than 50 years or so. It’s no wonder that Europe hasn’t been able to think large enough to see its complete context. Especially when all it did, essentially, was set up some economic structures based on a common currency.
Therefore, it descended to the usual lowest common denominator: he with the most money, wins.
Nicely parsed but not strictly true; the ECB’s machinations on behalf of profligate countries can easily translate to higher taxes for wealthier countries as well as for the offending members. Austerity alone will not solve fiscal emergencies, taxes must rise to help close the gaping holes blown in these economies by greed on the part of leaders of same.
Yeah that’s exactly how the depression of the 230s was cured….
Austerity and tax increases, I’m sure that will help increase demand and economic activity.
Was that how the depression of the 1930s was overcome??
Tax increases are real already: when you decrease government redistribution you de facto increase the taxes onto the poor or the general public. If I could go to the hospital yesterday for free and now I have to pay, my illness is being taxed, etc.
Taxes are not just something you get from people but also something that you do not give back. If the governments spends less in roads and harbors, then the economy will soon feel the pain of pitiful infrastructures, if the governments spend less in (real) law enforcement then soon the economy will feel the pain corruption, scams, robberies and violence…
What people normally mean when they say that taxes must rise is that the wealthy must pay for the crisisand must put up for the inability of the stripped off lower classes to pay anymore – because of all sectors of society the rich are generally the less taxed ones. We must tax capital transfers (in Spain they barely pay 1%, while I pay 18% VAT in any purchase), we must tax high profits and we must definitively heavily tax high personal incomes. Finally we must tax idle money and property, forcing it to be invested and not just speculated with.
“To say that this is somehow morally wrong as Issing does is the equivalent of a New Yorker complaining about the profligacy of an Alabama resident. It’s one economy, stupid – and you take the good with the bad.”
This is precisely what the Nick Santelli rant consisted of (ignore that he was in Chicago). The whole rant that set off the tea party movement was based on rich guys complaining that their taxes were going to go up to bail out some shlub in Alabama who took out a loan he couldn’t afford to remodel his bathroom. Never mind that that prior consumption was what paid his extravagant bonuses for the past five years.
You are correct, and the “tea party” is flat-out creepy.
…but wasn’t his rant about the mortgage mods then being proposed?
IIRC, the bail-out of the banks was not a problem with those guys, it was any steps to help Mr Shlub….but that isn’t their song now, is it?
Let’s have the EU put it up for a vote in Germany, Fiscal Union or No Fiscal Union. If the German voter wants a transfer union, similar to NY assisting Alabama, then he will vote yes. If not, the EU should fall.
What I don’t get is why so many of you don’t trust the judgement of the electorate.
Bizarre. The author sounds like Jean-Claude Juncker. Except that he truly seems to believe his own explications.
the notion that ordinary taxpayers should continue to pony up for the unfair advantages and benefits finagled by the public sector unions for their highly paid employees.
that is quite a stab at unions and these overpaid employees, just to begin with. quite inflammatory and unfounded, as well. I gather you don’t believe in unions. at least from what i read.
that is quite an opinion, slandering unions and their “highly Paid” employees.
not only is this untrue/overpaid, lol. it is quite funny, typical and small of you, and shows what little you know about the salaries of public employees.
such outright biases are yours to keep and believe in. I am just saying this is pejorative, your take, however unfounded.
i don’t live in your world, so i can’t understand such a bias like that. i do find such statements like that unnecessary as well as being so untrue
i would like to find such a group or union to go work with. unity is better than discord. a good product is made by competent workers and enhances the products value. if you think cheap is good, well, i disagree. though i bet cheap labor will produce cheap non durable products that most people won’t buy.
Course unions fail once the power of unity is abused by those in charge. look at how the unions became part of the problem in some cases. blanket statements are always exaggerations.
the real fallacy here is overpaid people. maybe years ago when America had a manufacturing base and jobs that went with that base. Reagan ended the unions with PATCO in the early ’80s. this is now. very few powerful and rich unions remain. just file bankruptcy and no obligations to pensions and other “Promises made”. Kind of like what is happening to Social Security. Told to put money into a trust fund. and then rip off the trust fund.
the sale of the American industrial base and the movement primarily to China of all our manufacturing jobs has done away with most unions that went with that base. 40% of our economy is Finance. we don’t have jobs that pay much anymore.
good jobs and good paying jobs are very hard to find nowadays. nobody spends cause they don’t have jobs that pay much. How can anybody spend money when there is NO extra at the end of the month.
i don’t know what world you’d envision Americans to live like. having money to spend would be nice. you know, after expenses. it might even get the economy going. Trickle up economics.
or maybe you’d prefer the Austerity mode?
In Ireland, I am paying ~150€/month extra tax since January 2011. Isn’t that a charge?
Hi, I’m portuguese. So, yes, I’m one of the PIIGS.
I’ve read most of the comments and really, with so many solutions here, I don’t understand why this crisis’s not yet solved ;-) I cannot argue with such economy experts but I may talk about the spirit of Mr Pilkington’s article from a “peripherical” POV…
First of all, don’t call us – portuguese – lazy, ok? Have you heard about portuguese workers in, let’s say, Germany, France, Luxembourg or Switzerland? Guess what, there’re no complaints. In fact, they’re excellent workers.
But, you may call us naïve.
This European, let’s call it “Union” was designed for the european exporter countries i.e. Germany, Netherlands, France etc
A country like Portugal was viewed from these countries as a possible future cow. We had 50 years of dictatorship and in 1974 – revolution year – we were barely in the 20th century.
So, the cow had no milk. So let’s bring the cow close to us and sell it the goods – thought the exporters. They sent money to build highways and to build up some middle-class with buying power. It was like feeding ants with sugar. Predictable. Portuguese had no money for decades. Suddenly they got it… We could buy. We did. Big trucks came from central Europe through highways built with central Europe money. We bought everything Germany, France, Netherlands etc sent.
Meanwhile, portuguese labor force was cheap. A bit dangerous, imagine they start producing… they may turn competitive and they may stop buying our stuff. So, let’s pay them some more to stop agriculture. Those old obsolete chaps will retire – this was named Operation “Common Agriculture Policy”. Ops, maybe we need some Operation “Common Fisheries Policy”. They’ll destroy their fishing boats for some coin, poor guys, they never seen so much money in their entire lives.
Well, I could go on an on. All these portuguese and their Governments were naïve, yes, naïve and stupid – were the northerners smarter or just had more power to dictate the rules? So, they shut out our production in a snap. And turned us into a buyer.
We bought until we had no more money. Then they lent us money so we could keep on buying. Finally we can’t afford to borrow more money. We can’t afford to buy any more Audis.
The cow’s dry.
Again, we were naïve. And we have to pay back our debts. We ask more money to pay our debts. We pay some high rate interest to whoever lend us the money. How come german tax payers are paying these bail-outs? In fact, it looks an excellent deal. Except if we default… after all, the stupid cow wasn’t completely dry. We can squeeze it a little bit more. The risk of default’s low. Portuguese are proud and will pay their debts.
But they won’t buy more german goods. Oh lala… big problem for exporters… they milked the cow till she almost died. But, in fact, exporters harvested through out peripherical Europe, milking every cow with a B plan on the pocket. After this, they would find another nearby herd. Eastern countries. They will harvest them until the end.
RIP European “Union”.
European exporters will proudly continue producing goods. They may start stacking them up their arses, probably. Meanwhile, Brazil, India and China will control world’s economy and Europe will be a decadent bunch of old nag-nags bitchin’ over their wheel-chairs and talking about the good old days when they gave Europe a chance to be “united”.
Thank you for your time and I apologize for my poor english and my lack of economic slang.
P.S. btw thank’s for lending us the cash through the bail-out. No worries, we’ll pay it back faster than Germany paid it’s WWII reparations.
In some parts of Spain actually Portuguese are archetypal hard workers. Don’t ask me why (because I’m Basque and I don’t understand many Spanish cultural clues) but now and then you hear a joke in TV about how annoyingly hard-working and way-too-serious are the Portuguese.
Here some times there is a feeling that Portuguese workers “steal our jobs” and work outside the established labor rights’ frame (for example too much overtime and too cheaply or in too poor safety conditions). But nobody thinks Portuguese are “lazy”.
“… we’ll pay it back faster than Germany paid it’s WWII reparations”.
LOL, that’s a good one. They took 60 years!
But Portugal is not Germany and its production economy is being destroyed, as happens elsewhere in Latin Europe. That is a problem that must be addressed at EU level (and if Germany doesn’t like, they can leave the EU, the Eurozone or even Planet Earth – it’s so tiresome and wasteful to have a Union that is so much focused on the needs of Merkel’s party!)
Prof. Michael Hudson disagrees with you, Mr. Pilkington.
The link:
http://michael-hudson.com/2011/08/german-taxpayers-willingly-subsidise-bankers/
The opening graf:
A bailout, like any other government expenditure, is a tax. Someone must pay all this money. And it is unfair to tax the broad population to pay for a special interest. Instead of being a progressive tax policy, bailouts enable bad behavior by the financial elite, sticking taxpayers with the cost.
I’m glad somebody on this thread finally pointed that out, since my comment to that effect (which would’ve been right at the top) was “excluded”.
But I posted it here:
http://attempter.wordpress.com/2011/08/10/urban-uprising-london-and-implications-for-the-new-movement-morality/#comment-6940
@Maju, spot on comment :-)
“A bailout, like any other government expenditure, is a tax. Someone must pay all this money. And it is unfair to tax the broad population to pay for a special interest. Instead of being a progressive tax policy, bailouts enable bad behavior by the financial elite, sticking taxpayers with the cost.”
I’m missing something here. So, a bailout it’s a cost? Sure. But not to lenders. Those who lend get some good high interest rate, don’t day? They could use that money to invest in there own economy but then… inflation, no? So, they go into credit business. Unless borrowers default, it’s an heck of a deal.
The taxpayers that pay up for the bail-out are the ones that borrowed the money. If you don’t believe check last taxes increase in Portugal. 10% cuts on public administration wages, half of this year Christmas subsidy went down the drain to pay the bail-out and we just got today new VAT increase on energie. These are facts for portuguese taxpayers. Anybody with numbers regarding direct bail-out funding with tax raise on Germany or other?